(Bloomberg) – Hon Hai Precision Industry Co. reported 15% faster-than-expected revenue growth after server assembly partner Nvidia Corp.
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Hon Hai, also the world’s largest iPhone maker Apple Inc., reported NT$2.13 trillion ($64.6 billion) in revenue for the past three months. December revenue rose 42%, helping the company known as Foxconn beat analyst expectations. It also forecast “significant” sales growth for the first quarter, helping its shares rise as much as 3.6% in Taipei, their biggest intraday gain in about two weeks.
The company and other Taiwanese AI hardware providers have enjoyed a boost from massive spending on data center servers by major US tech firms such as Alphabet Inc. and Microsoft Corp. But the lack of a compelling use case for AI has so far put off investors. nervous about when the expansion might slow down.
Goldman Sachs analysts revised their 2024 earnings estimate up 1% based on higher-than-expected December revenue. They also raised revenue estimates for this year and the next two years, citing higher AI server revenue.
“Sequential Cloud revenue growth supports our positive view on the next-generation rack-level AI server shipment ramp, and general server and network equipment demand recovery,” they wrote Goldman Sachs analyst.
Hon Hai expects revenue from its cloud business, which includes AI servers, to match sales from its iPhone manufacturing division in 2025.
However, Citi analyst Carrie Liu warned in a note that the stock could experience a near-term drag based on a first-quarter outlook from the company that looked less than market estimates.
The AI market is important to Hon Hai’s effort to diversify its business outside of Apple, whose iPhones are seeing muted growth. Apple has historically accounted for more than half of the Taiwanese company’s sales.
Hon Hai also aims to enter the electric vehicle market, although this has yet to have a significant effect on its earnings. The company contacted Renault SA for a tie-up with Nissan Motor Co., which Renault owns 36% of. For now, that search is on hold as Nissan and Honda Motor Co. are negotiating a merger, Bloomberg News reported.
(Updates with stock moves and analyst comments)
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2025-01-06 02:39:00
